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By Nisthar Cassim
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Fairfax Financial Holdings Founder, Chairman and CEO Prem Watsa
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Toronto-based Fairfax Financial Holdings Founder, Chairman and CEO Prem Watsa last week expressed confidence in Sri Lanka’s growth prospects and optimism to increase investments in select sectors which offer new opportunities.
Fairfax is a large investor in Sri Lanka’s premier blue chip John Keells Holdings (JKH) with an economic interest of 14% including a near 11% stake acquired in early this year for Rs. 23 billion. Additionally, Fairfax holds a 15% stake in JKH-controlled Nations Trust Bank as the second largest shareholder and owns 80% in Fairfirst, the fourth largest general insurer following the amalgamation of Union Assurance General and the former Asian Alliance General Insurance.
Globally, Fairfax is one of the largest general insurance groups in the world specialising in insurance, reinsurance, and investment management with operations in over 100 countries. Fairfax also has stakes in many Fortune 500 companies in its investment portfolio.
“We are really excited about Sri Lanka and its long-term prospects,” Prem told the Daily FT in an exclusive interview.
He said the rationale for investing in JKH is it is Sri Lanka’s largest and best-run company. The diversified premier blue chip mirrors the modern economy of Sri Lanka that includes tourism, real estate and property, retail, food and beverage manufacturing, logistics, ports, transportation and financial services among others, he added.
“I have been impressed by the dynamic leadership of Chairman Krishan Balendra. JKH has great vision, management and corporate governance,” Prem stressed.
Fairfax’s entry into JKH was a natural progression of the strong relationship via the first set of investments in the blue chip’s general insurance arm as well as NTB. “We don’t invest in sectors but in good and honest people as we are interested in building relationships,” says Indian-born Prem, who at 22 after migrating to Canada, founded Fairfax in 1985 with $ 10 million in assets and grew it to a global firm with $ 40 billion in investments under management 35 years later.
Prem said that at present Fairfax believes it has good exposure in the financial services industry of Sri Lanka with stakes in banking and general insurance. “We are exploring opportunities in other sectors as we are excited about Sri Lanka’s long-term growth prospects,” he said.
“We bring the expertise in the power supply sector via Vancouver-based Atlas in which Fairfax has a 40% stake, as well as airport development and management within broader infrastructure development as Sri Lanka needs a modern international airport to be a truly world-class tourist destination,” he said.
Apart from existing investments in Sri Lanka providing good returns, Prem and Fairfax’s optimism is due to several other reasons. “Sri Lanka’s strategic geographic location is certainly the biggest factor and the other is being next to the booming economic giant India,” he explained.
It was pointed out that India’s economy is expanding from $ 2.5 trillion to $ 5 trillion and under Prime Minister Narendra Modi’s dynamic leadership, India’s economy is poised to grow bigger and faster.
“With such a booming economy and market next door, envision how much Sri Lanka can benefit in addition to the island nation also having the potential to grow its economy from the current $ 85 billion to $ 150 billion in the next five years,” Prem emphasised.
He pointed out that countries such as Hong Kong, and several in Southeast Asia prospered because of China’s massive economic growth. The same is bound to happen when India grows to become a major global economic player, he added.
Fairfax has a growing presence in India, a market about which Prem remains highly optimistic. It has invested nearly $ 3 billion in India where it manages the Bangalore International Airport with a 54% stake under a public-private partnership.
The modern airport since privatisation has grown exponentially with a second and third terminal planned to cater to 90 million passengers as opposed to 20 million when Fairfax India took over. It also owns high-end travel specialist Thomas Cook India promoting both in-bound and outbound holidays.
Fairfax founder viewed the new Government led by President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa as business and growth-friendly judging by the recently unveiled 2021 Budget with consistent tax policies, new incentives offered for thrust sectors and a commitment to reduce the fiscal deficit in the medium term.
“The Government has the opportunity to get Sri Lanka back to a 6% growth path or higher in the medium to long term despite external and local challenges,” says Prem.
However, he is of the view that Sri Lanka’s quest for rapid but sustainable high growth can be realised if the ease of doing business is improved by minimising bureaucracy and if the country opens up further to foreign companies, brands and talent.
In response to preference by governments to impose restrictions to save local industries and farmers, Prem argues: “It is a trade-off between whether a country wants to remain expensive and become less competitive or open up and become competitive through healthy competition.”
“Protectionist policies don’t ensure success in the long run. Sri Lanka should open up and bring in the best. The Government can decide whom and what to bring in but the country’s doors must be kept open as well as ensure a level playing field,” Fairfax founder added.
Prem in fact pointed to restrictions and resultant lack of opportunities in the 1970s in India as a reason why he as well as several others migrated to the West. “Today the dynamics are different given the advancement in technology and rise in economic freedom and mobility,” he emphasised.
At the same time, Prem added, governments can and should encourage local entrepreneurs and companies such as JKH with the right policies, ease of doing business and good governance rather than offering tariff or market protectionism.
“Many countries are successfully doing this hence Sri Lanka needs to step up and go the distance. With a giant and fast-growing market like India next door, the window of opportunity is exponentially greater,” he emphasised.
“Right policies are what transformed giant economies like China and India whilst unleashing competitiveness in smaller successful Asian countries. Sri Lanka can learn from such proven examples to get its policies right,” Fairfax founder pointed out.
He cited the strategy initiative in South Asian giant called ‘Invest India’ which addresses existing bottlenecks hindering new foreign investments etc., and encourages investment in India in all sectors while removing roadblocks that existed.
When asked what would be his advice to young or aspiring entrepreneurs, Prem said: “Sri Lanka has got talent as I have personally seen in the diaspora in Canada. Sri Lanka should encourage young people to start and build companies. If someone thinks a particular business is good then go and build the business and encourage them,” he added.
When Prem, the third of four children and born in 1950 near Hyderabad, India, was 21-years-old and traveling on a train in India, a fellow passenger gave him a book titled ‘Think and Grow Rich’ written by Napoleon Hill.
He recalls the book was a study of people who had become financially successful. After talking with 500 successful Americans, the author came up with this phrase ‘what the mind can conceive, the mind can achieve’.
Prem’s take from that phrase and the book was that “success is in your head”.
Prem’s father was a teacher of English and math before becoming the principal of an excellent boys’ school. For Prem his father was a great influence and he recalls one piece of advice his father gave that remains fresh even today. “Work as hard as you can, as though everything depended on you. Pray as hard as you can, as though everything depended on God.’”
“Get a good education. Believe in your mind what you can accomplish, convince yourself first and not anyone else and then go about doing it,” enthuses Prem to young entrepreneurs or those who want to venture into entrepreneurship. “With India as your neighbour, Sri Lanka is a wonderful place to do it.”
